WSJ’s Stimulus-Debate Story is Debatable

A page-one piece says economists question whether stimulus makes things worse but can't find any who actually do

The Wall Street Journal goes big with a story on the debate over stimulus spending. But the piece doesn’t deliver the punch it promises. Instead, there’s a lot of he-said, she-said, and even a sleepy dose of Keynes-said, Friedman-said.

All in all, there’s not much here to help readers understand what’s actually under debate and what’s not.

This is the hedline:

Debate Heats Up Over Stimulus Spending

But the story starts to zig and zag, and makes it hard to tell if the debate that’s heating up is about the 2009 stimulus package, or whether to embark on a new one.

The lede left me expecting some real excitement:

Eighteen months after President Barack Obama administered a massive dose of spending increases and tax cuts to a weak economy, a brawl has broken out among economists and politicians about whether fiscal-stimulus medicine is curing the illness or making it worse.

Wow. A good, ole-fashioned (but just broken out) brawl. And, that lede suggests, perhaps some words of wisdom from that rare breed, an economist who things the stimulus made things worst.

‘Fraid not.

Actually, it’s hard to find much fresh blood in this economic argument. And it seems to wave the white flag on some of what it promised at the top:

Most mainstream economists agree on some points: The U.S. economy needed some kind of fiscal help in 2009 as the financial system teetered and the Federal Reserve pushed interest rates near zero. The deficit has to be reined in eventually, in part by restraining the growth of spending on health and other benefits. And developing a long-term plan to do so now would reduce risks of a future financial market calamity and help hold interest rates down.

OK, I get all that.

But then there’s this:

But today, neither side can say with certainty whether the latest stimulus worked, because nobody knows what would have happened in its absence.

That’s really trying to have it all ways at once—and reminds me of my daughter, whose new favorite response to almost any question is, “More or less.”

Is it really true that no one can say with certainty whether the latest stimulus worked? Or is it just that it’s hard to measure precisely how much it worked, and what would have happened without it?

As we’ve said before, figuring out good ways to cover the stimulus is harder than knowing that it needs to be covered. There’s a ton of data, heated debates about the economic differences between saving existing jobs and creating new ones, and a lot of plain political posturing. But you really can’t get good answers if you don’t ask meaningful questions.

It’s odd that this long WSJ story doesn’t mention something that got a decent amount of coverage last week, including on its own pages: what steps the Fed could take to help the economy if the outlook worsens.

Instead, there’s this, which gets presented as a bit of he-said, but really is a pretty widely held view:

Fed Chairman Ben Bernanke backed fiscal stimulus in early 2009. Now he says the economy still needs fiscal stimulus, but says it must be accompanied with a credible plan to reduce future deficits. Like the Obama administration, he doesn’t think that plan should be implemented until the economy is on more solid footing.

By now, most readers will have given up on hopes of any brawling. Instead, there’s some pretty standard, and pretty staid, stuff:

Underlying the debate is a long-running argument about how much of a lift the government gets from spending more or taxing less.

The piece continues with a few old economic hands explaining long-held positions. For econ fun, there’s also a bit about a study written by Christina Romer, President Obama’s economic adviser, and her husband, about the positive effects of tax cuts—something that’s sure to come up again and again in the looming tax debate.

And in the category of econ drama, there’s this, after a mention of Romer’s argument that every dollar spent by the government created about $1.50 worth of demand:

Some economists say that’s too high. Valerie Ramey of the University of California at San Diego, initially thinking as a Keynesian, developed doubts after sifting through historical examples. During the military build-ups of World War II, the Korean War and the Reagan era, a dollar spent added roughly a dollar of growth, she says. Although Ms. Ramey supported stimulus in 2009 because the economy was so weak, she doesn’t advocate more now. “We just don’t have enough evidence to prove that it’s good.”

Cool. She changed her mind. But she’s still not arguing that stimulus didn’t work—she just doesn’t want to do more now.

“We just don’t have enough evidence,” Ramey said. Journal readers might be thinking the same thing.

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Holly Yeager is CJR's Peterson Fellow, covering fiscal and economic policy. She is based in Washington and reachable at